Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here is one small-cap stock that could be the next 100 bagger and two that may have trouble.
Two Small-Cap Stocks to Sell:
Hillman (HLMN)
Market Cap: $1.89 billion
Established when Max Hillman purchased a franchise operation, Hillman (NASDAQ: HLMN) designs, manufactures, and sells industrial equipment and systems for various sectors.
Why Does HLMN Worry Us?
- Annual revenue growth of 1.6% over the last two years was below our standards for the industrials sector
- Operating margin of 3.9% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
- Underwhelming 2.5% return on capital reflects management’s difficulties in finding profitable growth opportunities
Hillman’s stock price of $9.51 implies a valuation ratio of 16.3x forward P/E. To fully understand why you should be careful with HLMN, check out our full research report (it’s free for active Edge members).
Byrna (BYRN)
Market Cap: $530.6 million
Providing civilians with tools to disable, disarm, and deter would-be assailants, Byrna (NASDAQ: BYRN) is a provider of non-lethal weapons.
Why Are We Wary of BYRN?
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Negative free cash flow raises questions about the return timeline for its investments
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Byrna is trading at $22.80 per share, or 25.7x forward EV-to-EBITDA. If you’re considering BYRN for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Watch:
IMAX (IMAX)
Market Cap: $1.71 billion
Originally developed for World Expo '67 in Montreal as an innovative projection system, IMAX (NYSE: IMAX) provides proprietary large-format cinema technology and systems that deliver immersive movie experiences with enhanced image quality and sound.
Why Do We Like IMAX?
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 34.3% annually, topping its revenue gains
- Free cash flow margin expanded by 26.4 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
- Rising returns on capital show the company is starting to reap the benefits of its past investments
At $31.57 per share, IMAX trades at 21.2x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
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